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Questions › JNU › JNU SSS 2017 › Q43
5 marksMicroeconomics › Budget constraint and consumer equilibrium › Corner solutionsHardabout 7 min

JNU SSS 2017 Question 43: Budget constraint and consumer equilibrium

In a two-good world, a consumer's utility function is given by the following : U(x,y)=max⁡{x,y}U(x, y) = \max\{x, y\}U(x,y)=max{x,y}, where xxx and yyy are the amounts consumed of the first and second goods respectively. The price of each of the two goods is ₹ 2 per unit. The consumer's income is ₹ 100. Draw the consumer's indifference curves and find out his utility-maximising consumption bundle(s).

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Plain-text version

In a two-good world, a consumer's utility function is given by the following: U(x, y) = max {x, y}, where x and y are the amounts consumed of the first and second goods respectively. The price of each of the two goods is ₹ 2 per unit. The consumer's income is ₹ 100. Draw the consumer's indifference curves and find out his utility-maximising consumption bundle(s).

Budget constraint and consumer equilibrium has come up 99 times in 7 exams since 2004.

What this question tests

This question is on Corner solutions, part of Budget constraint and consumer equilibrium in Microeconomics.

Optima at the edge of the budget set, where the consumer spends nothing on one good.

TestStop has 8 past-paper questions on this subtopic.

Practise Budget constraint and consumer equilibriumMore on Corner solutions

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